From CNN:
A high-yield investment product offered by China’s largest bank is facing imminent default, an event that will cost investors millions and raise questions about the country’s banking system.
Even the mainstream media is starting to report the $500 million Chinese bank default on January 31, 2014. As our banks are preparing for this economic ripple, what should you be doing?
First, you can take a few minutes to do your own research. Whether the Chinese default is the catalyst in a world wide economic collapse or one of the other 19 warning signs are the cause, this is a nexus point in our history. A little bit of financial understanding and preparation now will be invaluable in the future.
The title of this post comes directly from the referenced article below. Once the printing presses of the central planners stop, fiat currencies (and your life’s savings) will collapse. As the currencies of Turkey, Venezuela and Argentina did yesterday. This is not just another “doom and gloom” report: do your own research.
David DeGerolamo
Risk Off: Yen Soars, Equity Futures Tumble As EM Revulsion Escalates
It’s Risk Off time.
It all started early in the session when China’s banking regulator ordered regional offices to increase scrutiny of credit risks in coal-mining industry, signaling not only government concern about possible defaults but the implication that possible defaults especially in the much-discussed Trust product which may default as soon as a week from today. This caused a hiccup in the USDJPY which until that point was being pushed higher by Japanese banks hoping to reverse recent losses by adding to their losing long positions. But then things got really out of control, and the USDJPY plunged by some 150 pips in the matter of hours, plunging as low as 102, driven by unfavourable interest rate differential flows amid heightened concerns over EM nations, in particular TRY and ARS which also supported bid tone in USTs. This also saw spot TRY rate print fresh record high, while 5y Turkish CDS rate advanced to its highest level since June 2012, while at the same time Argentina announced it would life currency controls and dollar purchases in the aftermath of the ARS devaluation by 13%.
And since everything tracks the JPY carry pair as we have been showing for the past year, futures once again plunged overnight, for now held by 1810 support, Treasurys are bid throughout, with the same treasury yields that have “no where to go but up” sliding to 2.71% from 2.87% at the beginning of the week, while gold is finally spiking as the realization that absolutely nothing has been fixed, that apparently nobody got the taper is priced in memo, and that soon the Fed will have to untaper, begins to spread. Are the central planners finally starting to lose control?
…
The jury is still out on whether yesterday’s selloff was caused by the US data, poor corporate earnings or the Chinese PMI. Whatever the reason, the real damage was in done in EM where the rumblings from Turkey, Argentina and Venezuela cumulated in another very weak day for EM sovereigns. Even with the fall in the USD and rally in UST yields (-9bp to 2.78%), there was little to cheer in EM sovereign credit as the dual worries of inflation and potential BoP issues provided a common thread yesterday. All this provides a fairly nervous lead-in to next week’s FOMC where the consensus appears to be that another $10bn in tapering will result.
To put yesterday’s EM performance in perspective, the CDX EM and JPM EMBI credit indices widened by more than 15bp apiece in the worst one-day performance since the turbulent summer of 2013. Starting with Argentina, the peso suffered its biggest one-day fall in more than a decade (-13%) after the country’s central bank decided to pull its support for the currency in order to preserve its FX reserves which had fallen by almost a third over the past year.
